Inventory Forecasting

The Inventory Forecasting software helps users in inventory planning. Previously named Predictive Purchasing, Inventory Forecasting is a powerful tool that helps in demand forecasting. It calculates the quantity needed to cover anticipated sales, ensuring that you buy all that you need, and what you need only.

Inventory Forecasting considers all these factors:

• Forecast Period: The specific timeframe to cover, such as the upcoming quarter.
• Comparison Period: Analysis of historical sales data to gain insight into product demand and sales trends.
• Projected Growth: Anticipated growth rate leading to sales increases in the Forecast Period.
• Covered Days: The number of days in the Forecast Period for which you already have enough inventory.
• Interim Period: The time span between now and the Forecast Period, during which some of the inventory currently available is expected to be depleted.
• Lead-time: The time it takes for purchased goods to be delivered to the warehouse.
• Vendor Inventory: The suppliers who carry the products you need, along with their quoted costs and available stock.

Considering all these factors, Inventory Forecasting generates a Suggestion of the ideal quantity to purchase in order to meet predicted sales, and it suggest the best vendor to purchase from.

Using Inventory Forecasting

To access Inventory Forecasting, go to Purchasing › Forecasting from the Goflow sidebar menu.

In order to access Inventory Forecasting, users must have the Inventory Forecasting role assigned to their profile. This ensures that only authorized users have access to sales analytics.

The Inventory Forecasting flow follows this general outline:

1. Selecting a Comparison Period
2. Selecting a Forecast Period
3. Customizing Inputs and Recalculating Suggestions
4. Reviewing and Creating Purchase Orders

Selecting a Comparison Period

The first step is to set a Comparison Period. This period will serve as the basis for historical data analysis, which in turn will be used for generating Suggestions. The timeframe you select should be based on what makes the most sense to you. You may select the most recent quarter, or the same time last year as the Forecast Period.

To set the Comparison Period, click on the date-picker in the top bar under Comparison Period.

Customizing the Comparison Period

Adjust the Comparison Period to improve the accuracy of historical sales trends. The objective in refining the Comparison Period is to attain a more representative average. This historical average serves as the basis for generating Suggestions. To attain a more representative average, customize the Comparison Period in order to eliminate outliers and focus on relevant sales data only.

To customize, click on Options in the top bar under Comparison Period. Apply these filters:

• Stores: Choose whether to exclude specific sales channels that deviate from your usual business operations. For example, if you have wholesale stores with different operating patterns from your regular sales channels, excluding them from the analysis can provide a more accurate average.
• Warehouses: Choose to refine the analysis by selecting specific warehouses according to your needs. For instance, you might choose to focus exclusively on your own warehouse sales, excluding sales from FBA or 3PL. Alternatively, you can narrow it down regionally, such as concentrating only on American warehouse sales while excluding European sales.
• Minimum Sold: Exclude products with little sales activity. This helps filter out products that may not significantly influence overall sales trends.
• Minimum Orders: Exclude sales generated from a single order or just a few orders. This eliminates sales data that could be considered outliers or not representative of the general trend.

Calculating the Average

The Average Sales per Day is determined by dividing the Total Sales by the number of days in the Comparison Period. When calculating this average, a key decision is whether to include Stock-out Days, or days when the product is considered to be out of stock.

There are two approaches to stock-out days, and each affects the Average Sales per Day:

• Exclude Stock-Out Days: Consider only the days when the product was in-stock and available for sale. The Total Sales are divided by a smaller number of days, resulting in a higher average. This approach is suitable when you believe that insufficient inventory is the reason for lower sales, and you want to assess the sales potential under ideal inventory availability.
• Include Stock-Out Days: Consider all days in the Comparison Period. The Total Sales are divided by a larger number of days, leading to a lower average. This approach makes sense if supply is consistently limited, or if you want to have a comprehensive understanding of the overall sales performance, including the impact of stock-out situations.

To include No-Stock Days, select it in the Options menu in top bar under Comparison Period. If you decide to exclude Stock-Out Days, you can also define the No-Stock Threshold.

The threshold defines the minimum quantity level below which a product is considered out of stock. The threshold aligns with the inventory allocation safety levels, which are designed to prevent overselling. For instance, your inventory allocation settings might consider a quantity of 2 as out of stock. The Days In Stock figure indicates the number of days within the Comparison Period during which a product was in-stock, as determined by the No-Stock Threshold.

Selecting a Forecast Period

The next step is to specify a Forecast Period, which is the timeframe you intend to cover with your purchase. This timeframe could be for the next quarter, the quarter after that, or for an upcoming holiday season.

To set the Forecast Period, click on the date-picker in top bar of Inventory Forecasting. Select the duration of the period in Forecast Days, and select the date of the Forecast Start.

For each product, Inventory Forecasting will automatically assign its default vendor and default vendor Lead-Time. You have the option to keep the default vendor and lead-time or select a different vendor and customize the lead-time. You can make these updates for an individual product, or if you want to apply the changes to all products, you can do so through the Vendor and Lead-Time column headers.

Stretching the Forecast Period

Lead-time is the number of days it takes from the time a purchase order is sent to a vendor until the goods arrive at the warehouse. For each product, you can choose whether to keep the default vendor lead-time or set a custom lead-time. The lead-time on a product affects the Suggestion. For products with extended lead-time, where products are not expected to arrive before the start of the Forecast Period, an adjustment will have to be made to account for the days when products will not be available for sale.

There are two approaches to account for the effects of extended lead-time:

• Stretched Period: In this approach, you purchase inventory for the full Forecast Period, such as a full quarter. Products arriving after the start of the Forecast Period will still be allocated the full period. However, the start of the period will be adjusted to begin a bit later to compensate for the delay. It will also end later to ensure it gets the full number of days in the period.
• Reduced Suggestion: In this approach, you purchase inventory specifically for the dates in the Forecast Period. The Forecast Period remains fixed and does not extend beyond its end date. Products arriving after the start of the Forecast Period will get a reduced Suggestion to account for the days when they will not be available for sale.

To stretch the period, simply choose a Start date from the Forecast Period menu in the top bar, and leave Forecast Cutoff empty. If you prefer to keep the Forecast Period fixed and reduce the Suggestion instead, select a Forecast Cutoff date, which fixes the last date of the period, beyond which the forecast will not be extended.

You may choose of combination of both approaches. You can set a Forecast Cutoff that extends beyond the Forecast Period, but the number of days after the period is fewer than the number of the longest Lead-Time.

Customizing Inputs and Recalculating Suggestions

After Inventory Forecasting generated its initial Suggestions, you can continue making adjustments. You can adjust the Projected Growth, change Vendors and Lead-Times, modify Comparison Options, and apply Filters. After making changes, click the Recalculate button to generate updated suggestions.

Applying Product Filters

To further refine your purchasing decisions, use product filters. These filters enable you to customize which products are included in the Suggestions. Use these filters:

• Item Number: Show only these specific item numbers.
• Buyer: Show only products associated with particular buyers.
• Brand: Show products from specific brands only.
• Category: Show products of specific categories only.
• Manufacturer: Show products from specific manufacturers only.
• Product Status: By default, Inventory Forecasting displays only Active products.
• Product Type: Select whether to show Kit products or only Standard products. Group products are never shown.
• Product Fulfillment Method: Inventory Forecasting shows only Warehouse products by default. Select to include PTO or Dropship methods as well.
• Default Vendor: Only show products which have these vendors as their default vendor.
• Minimum Suggestion: By default, Inventory Forecasting displays products with a Suggestion of at least 1. Adjust to a higher number to meet the vendor's purchase minimums.

Reviewing and Creating Purchase Orders

Inventory Forecasting generates a Suggestion for each product using various factors. To enhance your understanding of the calculations, you can add additional columns to the report. Not all columns are shown by default. To display more available columns, click on the columns icon located in the upper-right corner of the report. Place a check next to each column you wish to display, and an X next to any column you want to remove. For an explanation of each column, click on its tooltip.

The Suggestion will automatically populate the Quantity to Purchase field for each product. You have the option to either accept the final suggestion or manually input a different quantity as you see fit.

For products where the default purchasing unit of measure is greater than each, the Quantity to Purchase is rounded up. For instance, if the Suggestion is 11, but the default purchasing unit of measure is a dozen, the Quantity to Purchase will be rounded up to one dozen, equivalent to 12 units.

Once you are satisfied with the numbers, you are ready to create purchase orders:

1. Select the products to purchase. You can manually select the products one by one, or you can check the top of the column to select all suggested products for purchase.
2. Proceed to Review Purchase Orders. This page is divided into two sections. The upper section lists all the vendors for whom you will create purchase orders. Click on a vendor to view the products included in the lower section. If you need to make any adjustments, click on the Back button to return to the previous step and make the necessary changes.
3. When you are satisfied with the contents of a purchase order and it looks good to proceed, click on the Review Purchase Order button. This action will open the purchase order for your review.
4. At this stage, you have the opportunity to make any last-minute updates to the purchase order, if needed. Ensure that all the details are accurate, and proceed to Save the purchase order and to Send it out to your vendor.

Forecasting for Kit Products

If you sell kit products, you can include in the forecast report projected kit sales, and get suggestions to purchase the children products required to create the assemblies. To include non-purchasable kits, select Include Required Assemblies in the Options menu in top bar under Comparison Period.

When required assemblies are included in the forecast, the children products of non-purchasable kits have two types of needs: Needed for Kits and Needed for Child. These two figures are taken into calculation, and ultimately produce a single Suggestion. Click on the kit icon next to the Suggestion to view the breakdown details.

To illustrate, consider SKU ABC-2PK, a non-purchasable kit consisting of 2x the standard product ABC. If the prediction indicates 10 sales for the standard product ABC and 10 sales for kit ABC-2PK, the combined Suggestion will be for 30 units of ABC. This includes 10 units needed for ABC itself, and an additional 20 units needed for assembling 10 kits of ABC-2PK.

This option applies specifically to kits marked as non-purchasable. Such kits are not purchased directly from vendors; rather, they are assembled in your warehouse using the children products that are purchased separately. Kits marked purchasable are included in the forecast reports like all standard products.

Glossary of Inventory Forecasting Terms

These terms are used in the discussion of Inventory Forecasting. Some of these terms are used as column headers or selectable options within the Inventory Forecasting report.

• Available Inventory: Stock levels, as they were at the moment Inventory Forecasting was loaded.
• Average Sales per Day: The average quantity of unit sales made per day during the Comparison Period. The average is the quotient of Total Sales over number of days in the Comparison Period.
• Comparison Period: The period used as the basis for sales analysis, such as the last quarter, or the holiday season last year.
• Covered Days: The number of days in the Forecast Period for which you already have enough inventory. This includes both Available Inventory and Expected Inventory, while also considering the inventory that will be used up during the Interim Period.
• Days In-Stock: The number of days in the Comparison Period during which a product was at or above the Threshold.
• Default Purchasing Unit-of-Measure: The unit of measure normally used for purchasing, e.g. DZ, CS, or EA.
• Expected Inventory: The stock expected to arrive from purchase orders, productions, and transfers, as they were at the moment of Inventory Forecasting was loaded.
• Forecast Cutoff: The absolute final date of the Forecast Period, after which the period will not be extended for any product.
• Forecast Days: The number of days in the Forecast Period. The Forecast Period may include more days if a Forecast Cutoff date is not set.
• Forecast Period: The period for which to purchase inventory, such as the upcoming quarter or the upcoming holiday season.
• Forecast Start: A date in the future that marks the beginning of the Forecast Period.
• Forecasted Sales: The total quantity of units predicted to sell during the Forecast Period.
• Interim Period: The time span between now and the Forecast Period, during which some of the inventory currently available is expected to be depleted.
• Inventory Snapshot: A specific moment in time, typically in the early morning of each day, when the inventory status is recorded or captured. To see the Snapshot for a specific day, go to Reports › Inventory › History.
• Lead-time: The number of days it takes from the time a purchase order is sent to a vendor until the goods arrive at the warehouse.
• Needed for Child: The units of a standard product needed to meet its own projected sales.
• Needed for Kits: The units of a standard product needed to meet the projected sales of its parent products.
• Non-Purchasable Kit: A kit product that is not purchased from a vendor, but assembled from children products in your warehouse.
• No-Stock-Threshold: A minimum quantity that a product must maintain in order to be considered in-stock.
• Projected Growth: Anticipated growth rate, expressed in a percent, between the Comparison Period and the Forecast Period.
• Quantity to Purchase: The quantity that will be applied to purchase orders. This field is prefilled with the Suggestion.
• Stock-out Day: A day in the Comparison Period when a product was below the Threshold at the moment of the Inventory Snapshot.
• Suggestion: The quantity that Inventory Forecasting recommends be purchased to cover for the Forecast Period.
• Total Sales: The total quantity of unit sales made during the Comparison Period.
• Vendor Inventory: The stock available to purchase from your vendors, as they were last updated in Goflow.